A complete turnaround in SE Asia weather has occured this summer compared to last year. Persistent El Niño conditions in 2015 and 2016 helped force below normal rainfall for India. A dry hot 2015/2016 winter in India furthered poor irrigation levels. This year, rainfall for All-India and the cumulative anomaly is above normal. See below:
India’s monsoon has shined, particularly in the Northern sugar areas. There are two main areas for sugar production: the Southwest (states of Maharashtra, Karnataka) and the Northeast (Uttar Pradesh). The spatial rainfall anomalies for the past 90 days show near normal to above normal rainfall has occurred so far. Readers should also note that Thailand, a major producer, has had above normal rainfall.
The current outlook for India sugar production is good, but, sugar traders will still be watching the end of the monsoon in India, which runs into October.
Brazil Crush & Fuel Tax
Sugar prices have fallen nearly 33% since early winter. Great expectations of the Brazil crop, which started developing in December, have helped prices decline. See the chart below:
Besides periods of showers in late May, there has been little disruption of the sugar harvest in Brazil. On Tuesday, the Brazilian Sugarcane Association (Unica) released their crush numbers from the first two weeks in July. Production was up 9.1% from last year, with a total of 3.1 million metric tons. The other news from Brazil this week was a reinstatement of the fuel tax. It is expected that the tax should help widen the price spread between ethanol and gasoline. This could make ethanol production more appealing, leading to less sugar cane used for the food industry.